Irish developer wins appeal against "bad bank"

DUBLIN: An Irish property developer has won a legal challenge to stop the National Asset Management Agency (NAMA) acquiring his loans, a ruling that complicates the operations of the state-run agency, dubbed the "bad bank".

Ireland's Supreme Court said on Thursday a decision to acquire 2.1 billion euros ($3 billion) in loans secured on Paddy McKillen's assets was not valid because it was made before NAMA was legally established.

That overturned a High Court ruling last year that found in NAMA's favour.

McKillen wants to avoid transferring his loans to NAMA lest such a transfer damage his reputation and compromise his companies.

"It is clear that the decision taken by the interim team of NAMA between Dec. 11 and 14 had no legal effect," Chief Justice John Murray said in court. "The NAMA board could have taken steps to stop this problem arising."

The Supreme Court decision may mean NAMA will have to start the process of acquiring McKillen's loans from scratch.

The agency's chairman, Frank Daly, said it would consider its options. "However, it is important to note that the decision relates specifically to the particular case as presented by Mr. McKillen and does not have implications for other acquisitions now completed by NAMA."

U2

The publicity-shy McKillen, who co-owns Dublin's Clarence Hotel with rock group U2 band members Bono and The Edge, had said his loans were being repaid and had no place in NAMA, which was established to take over Irish banks' risky commercial property portfolios.

NAMA, which has so far acquired loans with a nominal value of 71 billion euros, needs performing loans to generate income. The high discount it has demanded on the loans has punched large holes in banks' balance sheets, which the state has had to plug.

The banking crisis, with its roots in reckless lending to developers, forced Ireland to apply for an 85 billion euros EU/IMF bailout last year.

Under the terms of the bailout, NAMA will acquire up to 20,000 additional loans from Bank of Ireland and Allied Irish Banks by the end of March. The nominal value of those loans will be under 16 billion euros, the government has said.

Belfast-born McKillen had appealed against the High Court's ruling in favour of NAMA on five issues. The Supreme Court ruled against one of those contentions on Thursday, by finding that NAMA had not breached state aid rules. It will sit next Wednesday concerning the remaining three issues.

The developer, who hired Nobel prize-winning economist Joseph Stiglitz as an expert witness in the case, owns shopping centres, offices and five-star hotels in the UK, Ireland, France and the United States.

His assets include London luxury hotels Claridges, the Connaught and the Berkeley.